Paying informal charges to government officials for service or privileges adds to the costs of running a business. If the amount of informal charges is unpredictable, or the bribery efficiency is less than perfect, it will increase operational risk and thereby diminish the interest of investors and slow the rate of foreign direct investment. Thus, public sector corruption is recognized as both an impediment to doing business and a major obstacle of economic development. When public sector corruption is endemic, it undermines the rule of law, property rights, and enforcement of contracts, thus eroding fundamental institutions of free markets. Politically, rampant public sector corruption discredits the ruling government and may lead to widespread public frustration and upheaval.
The Informal Charges Sub-index aims to measure the prevalence of paying informal charges for firm level operations as well as of the fairness of the government procurement process.
The higher overall index score along with the individual scores for sub-indices always refer to a better performance within the context of the BEI.